Go for net zero: A practical plan for reliable, affordable, low-emissions electricity

by Tony Wood, James Ha

11.04.2021 report

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Australia can achieve a net-zero carbon emissions electricity system without threatening affordability or reliability of supply.

It’s a myth that Australia needs to continue to rely on coal-fired power stations to keep electricity bills down.

But we should not rush to 100 per cent renewable energy, because ensuring reliability would be costly – especially in the depths of winter in the southern states when electricity demand is high, solar supply is low, and persistent wind droughts are possible.

Grattan Institute developed an economic model of Australia’s National Electricity Market (NEM), finding that moving to a system with 70 per cent renewable energy – and closing about two-thirds of today’s coal-fired power plants – would not materially increase the cost of power but would dramatically reduce emissions.

The economic modelling suggests that moving to a system with 90 per cent renewable energy – and no coal – could also be reliable.

But some additional costs – such as more generation, transmission, and storage – would be necessary to ensure supply when the wind isn’t blowing and the sun isn’t shining. Nonetheless, this would be a low-cost way to nearly eliminate emissions in the NEM, and offsetting any remaining emissions each year could well be the cheapest way to reach net zero.

Australia can make the historic transition to a low-emissions electricity system without the lights going out and without power bills skyrocketing.

But getting to 100 per cent renewable energy over the next two decades would be expensive unless there are major technological advances to backup renewable supply through rare winter wind droughts. That’s why Australia should commit only to net zero emissions in the NEM by the 2040s, not absolute zero emissions or 100 per cent renewable energy.

Gas generation with negative-emissions offsets will be the lowest-cost ‘bridging’ technology until a zero-emissions alternative, such as hydrogen-fired generation, pumped hydro storage, or carbon capture and storage, becomes an economically competitive backstop.

Gas is likely to play the critical backup role, though not an expanded role. Australia will make a gas-supported transition to a net-zero emissions electricity system – but not a ‘gas-led recovery’ from the COVID recession.

Most of Australia’s coal-fired power stations are scheduled to be retired by 2040. Governments should not to use taxpayers’ money to extend the life of existing coal-fired generators, or to subsidise the entry of new coal-fired generators.

Australia can achieve the trifecta of reliable, affordable, low-emissions electricity, and we can do it without coal.

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